Business confidence grows as reforms bear fruit

Business confidence in the Nigerian economy is growing, thanks to the federal government reforms which are already yielding positive results.

A recent Stanbic IBTC PMI survey shows that the Purchasing Manager’s Index (PMI) rose to 54.5 in January 2025 from 52.7 in December 2024, above the 50.0 mark, signalling a strong improvement in the performance of the private sector.

“Nigeria’s private sector activity sustained its improvement in January 2025, albeit lower than levels seen in December 2024,” according to Muyiwa Oni, head of Equity Research West Africa at Stanbic IBTC Bank.

“We note an increase in both output (53.7 vs. December 2024: 54.8) and new orders (52.6 vs. December 2024: 53.2), although slightly weaker than that seen at the end of 2024, on account of improving customer demand and more willingness to commit to new projects,” he said.

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While the framework for doing business continues to improve in Africa’s biggest oil producer, investors want more for further assurances, according to Samuel Sule, CEO of Renaissance Capital Africa.

The assurance of policy stability means investors could tie down capital with little or no fear of policy swings that could lead to uncertainties and deter more foreign capital inflows.

“The need for effective implementation of policies is also important, as rules require clarity or effective timely enforcement,” Sule added.

For Samson Simon, CEO and chief economist at ARKK Economics and Data Limited, Nigeria needs to improve in transparency and its overall ease of doing business index to rein in capital flight.

“The more transparent an economy is, the less corrupt it is. And every business goes to where corruption is less,” he said.

He advocated that the government’s reforms should be “well sequenced and properly coordinated to make Nigeria an economy of choice for investors.”

Manufacturers’ CEO confidence

Similarly, the manufacturing CEOs’ confidence index in Nigeria rose marginally in the fourth quarter (Q4) of 2024 as consumer demand surged during the festive period.

The aggregate Manufacturers CEOs Confidence Index (MCCI) of MAN increased by 0.5 points to 50.7 points in Q4 from 50.2 points in the preceding quarter of 2024.

According to MAN’s Q4 report, current business condition, employment and production level indices recorded improvement due to the moderate increase in consumer demand, especially during the festive period.

Reading above 50 points indicates the expectation for economic expansion, while an index score of less than 50 suggests deterioration in the operating environment.

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CBN business confidence shows improvement

Similarly, the CBN Business Expectation Survey (BES) for January 2025 indicates an overall positive outlook for the economy, with a confidence index of 18.9 points in January 2025.

The confidence index stands at 25.2 points for February 2025, jumping to 35.9 points in April 2025 and 43.3 points by July 2025.

The indices generally show that respondents expect a further appreciation of the naira, driven by the CBN’s efforts to enhance transparency and stability in the foreign exchange market.

Naira stability, the game changer

The naira has largely been stable since late 2024. It has turned from the worst-performing currency to one of the best emerging markets’ currencies.

The naira on Monday appreciated against the dollar in one month, gaining N105 year-to-date in the parallel market, popularly called black market.

Data collated from the online trading platforms and street traders showed that the naira rose by 6.7 percent as the dollar was quoted at N1,560 on Monday compared to N1,665 at the beginning of the month at the black market.

At the official market, the naira strengthened against the dollar by 1.8 percent between January and February 2025.

At the end of trading on Friday, the naira gained N27.50 as the dollar traded for N1,511 as against N1,538.50 traded at the beginning of the month at the Nigeria Foreign Exchange Market (NFEM), according to data from the CBN.

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Economists and financial experts attribute the naira rebound to the now functional refineries, reforms at the foreign exchange market and foreign inflows.

The CBN said in its economic report that the net FX flows through the economy rose to $5.95 billion in November 2024, compared to $1.7 billion in the corresponding period of 2023.

The net FX flow is the difference between the total inflows and outflows of foreign exchange. A positive net FX flow indicates that more foreign currency is entering the economy than leaving, which can strengthen the country’s foreign reserves and the exchange rate.